Mei Zi Tan is a sessional teaching staff in Faculty of Business and Economics, Monash University. She is currently pursuing her PhD degree in Faculty of Law in the same university. Prior to joining Monash University, Mei Ziwasa senior tax consultant in BDO and KPMG Tax Malaysia. Her background spans the areas of taxation, economics, accounting, and environmental law.


For more than a decade, the European Union Emission Trading Scheme (EU ETS) enjoysthe fame for being the world’s largest ETS. Nonetheless, the reality behind this fame is that the scheme has not been optimally designed to achieve its key objective of mitigating greenhouse gas emissions. Due to its unsatisfactory performance, many researchers have examined the regulatory challenges in the EU ETS using economic lens. Their works are valuable but less pragmatic for policymakers. This articleaims to supplement the existing economic literature on the EU ETS by offering useful insights using legal lens. Specifically, it willanalyzethe influence of governance factorson the design features of the EU ETS. The regulatory problems of the EU ETS from Phase I to Phase III are explained using a three-level governance model as shown on the right. The main arguments are that the regulatory problemsofthe earlier phases were due to the discretions given to the member states.On the other hand, the sub-optimal reforms in current phaseare largely the responsibility of the EU legislative institutions – the European Commission, the European Parliament, and the Council of Ministers. As for Phase IV, this article highlightsthe importance of citizensin shaping the future reformsof the EU ETS. The findings of this article provide relevant inputs for policymakers in the EU and other jurisdictions.